Islamabad:
The World Bank warned on Wednesday that almost 10 million Pakistani could face acute food insecurity during the current fiscal year, and poverty levels are expected to increase. The warning occurred when the bank also reviewed Pakistan’s economic growth forecast to 2.7%, citing strict economic policies that suppress national production.
In his Biannual Biannual Economic current and Biship report, the Washington headquarters said that the government is likely to lose its annual budget deficit objective. In addition, the country’s debt burden is expected to increase both in absolute terms and in GDP proportion.
“With the climatic conditions that affect the general agricultural production of key crops such as rice and corn, almost 10 million people are expected to, mainly in rural areas, experience high levels of acute food insecurity in fiscal year 2015,” said the World Bank.
The report focuses on issues that are not frequently discussed in official meetings: food insecurity, poverty, unemployment and decreased real wages.
The report stressed that “the key sectors for the poor (agriculture, construction and low -value aggregates services) experience low or negative growth, causing stagnant real salaries.”
Combined with population growth of around 2%, this is expected to push approximately 1.9 million more people to poverty in this fiscal year. Not only that, the employment-population relationship is 49.7%, which reflects the low labor market share, particularly between young people and women, the WB said.
The report declared that social protection expenses have not followed the rhythm of inflation, restricting the resources available for the poor for food, health, education and other critical articles, with negative implications for human capital and labor productivity.
He said that 37% of young people and 62% of women are not in education, employment or training. “Although nominal daily salaries almost double for low -qualification workers, such as Masons, painters, plumbers and unqualified workers, real wages remained stagnant or even slightly diminished,” according to the lender.
As a result, poverty staff, even in the official national poverty line, would increase slightly. The World Bank said that, although it used the National Poverty Line of RS3,030 per adult equivalent per month in 2013-14, or RS8,231 in prices of 2024, the projected poverty personnel rate is 25.4% for this fiscal year.
Slow economic growth
The World Bank said that economic growth is expected to remain at 2.7% in this fiscal year, which is in line with the forecasts made by the International Monetary Fund (IMF) and the Asian Development Bank (ADB). It means that the government will lose its economic growth objective of 3.6%, that the Minister of Finance, Muhammad Aurengzeb, had described in the budget as attainable.
The key challenge of Pakistan is to transform the recent profits of stabilization to economic growth that is sustainable and adequate for poverty reduction, “said Najy Benhassine, country director of the World Bank of Pakistan.
He stressed that high impact reforms to prioritize an efficient and progressive fiscal system, supporting a certain exchange rate of the market, reducing import rates to boost exports, improving the business environment and the rationalization of the public sector would indicate a strong commitment to reform, generate trust and attract investments.
The World Bank said that growth was expected to be resumed in the next fiscal year to only 3.1% and then at 3.4% in 2027. The growth projections of the three years were lower than the annual objective of the government fiscal year of 3.6%.
The report indicated that it was projected that inflation would decrease to 5% this year, which reflects a moderate demand, lower prices of basic products and energy, and a stable exchange rate.
For this fiscal year, it is projected that the current Pakistan account reaches a surplus of 0.2% of GDP or $ 800 million, the first annual surplus in 15 years, promoted by remittances of stronger workers, the World Bank said. This will help compensate for a broad commercial deficit as import growth exceeds exports growth. The current account is expected to return to a 0.5% deficit in the next fiscal year, he added.
Missing budget deficit objective
Against the Government’s budget objective of 5.9% of GDP, the World Bank said that the deficit is expected to remain in 6.8% of GDP in this fiscal year. It means that the Government will spend RS1.1 more than the budgetary objective. The lender said that it is still anticipated that the primary budget balance reaches a surplus of 1.9% of GDP in fiscal year 2015, mainly due to SBP profits.
He said that gross financing needs will remain high during the entire forecast period, reflecting the short -term matured debt, reimbursements to multilateral and bilateral creditors, and Eurobond’s upcoming maturities. The public debt is expected to be guaranteed debt, reach 74.6% of GDP in this fiscal year, compared to 72.7% of the last year, said the lender.
Advance
The World Bank urged Pakistan to restore the operation of the Interbank currency market along with the totally determined exchange rate of the market.
He has also asked to take more measures with the correct size of the government, including the elimination of redundant or unproductive positions or agencies and requested the review of public sector compensation, including monetization and simplification of benefits in kind to reduce costs and improve transparency.
He emphasized the need to implement parametric pension reforms to substantially reduce future liabilities and facilitate transition to a system based on the contribution over time.
“Pakistan’s economy has become the corner and stabilized. However, the economic perspective remains fragile and any implementation delay in structural reforms or changes in economic stabilization could reduce the nascent recovery and intensify external pressures,” said Anna Twum, the main author of the report.
The risks are still high due to high levels of debt, global commercial policies and uncertainties, and exposure to climatic clashes, TWUM said.
The World Bank has also urged the implementation of income tax and agricultural income reforms recently reviewed in the valuation of the property to address the current current subvaluation. It sought a reduction in the number of items with zero rating under the fifth schedule, which means imposing more taxes.
The World Bank recommended the elimination of preferential treatments under the Ordinance of Income Tax and performs ex -cost evaluations before for new exemptions, evaluate past exemptions and institute sunset clauses.
